BNM Calls For More Concerted Efforts To Cut Remittance Cost

KUALA LUMPUR, Nov 25 (Bernama) -- Malaysia's Central Bank (BNM) has called for more concerted efforts towards dismantling barriers for a reduction in the remittance cost and enable various economies, especially developing nations, to reap its full benefit. "Access to remittance services contributes to a more inclusive financial system and provides a vital means of financial support to millions of households," Deputy Governor Muhammad Ibrahim said. For some economies, he added, the remittance flow contributes between two and 49 per cent of the Gross Domestic Product (GDP), and represents an important source of foreign currency for them. In 2014, remittances to developing countries was estimated to be at more than US$435 billion. Of this, more than half, was to the Asia Pacific region. "In developing economies, a reduction in the remittance cost to five per cent, can add up to US$16 billion annually for the income of migrants and their families. "To reap these benefits, we must do more to address the underlying impediments to achieving a cheaper cost. "This includes dismantling barriers to competition and reducing duplicative efforts in the remittance infrastructure and systems," he said at the Money Transfer Asia Pacific Conference 2015 here on Tuesday. He also said there must be a more integrated remittance ecosystem through greater interoperability and support a larger role of non-banks in facilitating safe, efficient and widely accessible business remittances. "Banks should also develop more refined approaches for conducting risk assessments, while the remittance industry needs to provide a strong assurance on the dependability and integrity of its operations," he added. The World Bank has reported that the global average cost of sending US$200 has reduced from almost 10 per cent in 2009 to 7.7 per cent in the first quarter of 2015, but it is still below the five per cent target set by it. The United Nations aims to reduce the remittance cost to less than three per cent by 2030 and ensure no remittance corridor requires charges higher than five per cent. Muhammad said while average costs have come down in many corridors, remittance costs continue to vary widely across the regions, ranging from 5.9 per cent in the South Asian region to as high as 11.5 per cent in the sub-Saharan Africa. "In Malaysia, the remittance cost also varies depending on corridors and types of service providers. Remittance to the major corridors is between four-seven per cent using a non-bank remittance provider and six-nine per cent for banks," he added. Remittance by migrants in Malaysia has grown four-fold in just the last seven years to US$7.59 billion (RM32 billion), with non-bank service providers now accounting for two-thirds of all remittances. According to Muhammad, although the World Bank and United Nations targets seems ambitious, they are by no means unrealistic, in a world where financial and technological innovations has propelled applications beyond expectations. "Therefore, there is still room for further cost reduction (especially in Malaysia) of at least two per cent for non-bank remittance providers and four per cent by the banks," he said. -- BERNAMA